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IntroductionIn 2007, the Panama Canal Authority (ACP) started work on its

$5.25 billion expansion project, which will change world trade

patterns and open the waterway to new markets.The expansion

will double canal capacity by 2014 and allow for the transit of

larger and wider vessels, with a 160 foot beam, 1200 foot LOA and

50 foot of draft. To provide for the transit of todays post-Panamax

vessels, the most powerful dredging equipment in the world is

currently deepening the waterways entrances in the Pacific and

the Atlantic, while huge excavators open the access channel that

will join the post-Panamax locks with narrowest section of thecanal -the Gaillard Cut. In this section of the canal, explosives

are being used to deepen and widen the navigational channel to

make space for the larger vessels that will use the waterway in the

near future. Thousands of cubic meters of concrete are currently

being poured in the new locks- structures which will incorporate

environmentally-friendly water- saving basins. These new locks will

use 7 percent less water per transit.

The projectThe Panama Canal expansion is a project of global importance,

designed to maintain the waterways competitiveness and

enhance the value of the Panama route. After years of analysis and

hundreds of studies performed by the ACP, the people of Panama

decided that it was in the best interest of the nation to engage in

a project that would not only guarantee the sustainability of its

main asset, but that would also be an economic engine capable

of offering a myriad of opportunities for generations to come.

Last year, the Republic of Panamas gross domestic product grew

by 10.5 percent and unemployment is at the lowest levels ever

experienced, at 3.5 percent.

The execution of the project has drawn the interest of the

international community, and has put Panama on the map in a

way never imagined during the projects conceptual stage. The new

locks dimensions were designed to handle vessels of up to 170,000

deadweight tonnage or 12,600 TEU. However, ingenuity have been

the norm around all aspects surrounding the project, and recently,

the Korean shipyard, Samsung Heavy Industries, unveiled its designfor a 13,200 TEU containership that will fit the dimensions of the

expanded locks. Containers are the main commodity through the

Panama Canal, accounting for over 50 percent of toll revenues.

By the time the expanded canal opens, the ACP expects

the deployment of containerships of more than 10,000 TEU

through the new locks. Ports in the East and Gulf Coast of the

US are making every effort to upgrade their infrastructure to

meet the demand of post-Panamax vessels.

The benefitsIt is clear that those ports that are ready to handle the larger ships

will reap the most benefits, and these benefits will translate into

more cargo at the terminal as well as in more jobs related to thehandling and distribution of the cargo, as well as other business-

related transactions.

There has been some debate as to the impact of the Panama

Canal expansion in the West Coast of the US. Most of the

focus is on the possibility of the East Coast stealing cargo

away from the West Coast. However, a good opportunity is

being overlooked and that is that trade will open between the

West Coast of the US and the East Coast of South America,

particularly Brazil, which is an important emerging market.

The Panama Canal expansion impact will be felt in several

market segments. Grain, the second most important commodity

to go through the waterway, will also benefit, as the expansion

will facilitate the flow of grains originating in the Midwest

of the US. Annually, around 40 million metric tons of grains

particularly soybeans, corn and sorghum move in barges

through the Mississippi River system to ports in the Gulf Coast

where they are loaded into dry bulkers that reach Asian markets

via the Panama Canal. The expanded canal will allow for the

transportation of grains in vessels of around 100,000 deadweight

tonnage, generating economies of scale in shipping. Additionally,

the ACP is currently assessing the potential of soybean

movements originating from northern Brazil to Asia.

Other South American commodities that could be shipped in

larger volumes through the expanded canal are coal and iron ore

originating from Colombia and Venezuela, with destinations in Asia.

In particular, coal exports from Colombia are expected to increase

The Panama Canal expansion and itsimpact on world tradeMarianela Dengo, Customer Relations Unit Manager, Market Research and Analysis, Panama Canal Authority

The Panama Canal.CourtesyofthePanamaCanalAuthority

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by more than 200 million tons in the next ten years. Colombian

coal shipments to China could transit the canal in capsize vessels

of 175,000 deadweight tons, and they have the advantage of

having a lower cost than coal originating in alternate production

sources. Most investments related to coal production and export

are concentrated in the Central and Northern Departments in

Colombia. For this reason, there are many port and future railroadinvestments in the Caribbean coast of Colombia. In terms of iron

ore shipments through the Panama Canal from Venezuela and

Northern Brazil, they could benefit from an expanded canal with

a larger utilization of ship sizes used in this trade route. Both coal

and iron ore shipments will have the opportunity to explore the

growing Asian market with the expansion of the Panama Canal.

Since the ACP announced to the international community its

intent to build a third set of locks, different players of the LNG

sector have approached us about their interest to deploy this cargo

through the expanded canal. LNG is a completely new trade for

the ACP, as the existing locks cannot accommodate this type of

specialized vessel. The ACP foresees the deployment of LNG

vessels with the capacity to transport over 100,000 cubic metersof liquefied natural gas through the new locks. The Panama route

could become a new competing route for some cargoes originating

in Peru with destinations Europe, and from shipments from

Trinidad in the Caribbean to Chile. However, the greatest potential

for LNG through the canal depends on the developments of shale

gas in the US and Canada; particularly, if shale gas is exported from

the East Coast of the United States to Asia. We have been following

very closely the developments in terms of permits, production and

liquefaction plants location and are inclined to believe that the first

LNG exports from the US may coincide with the completion date

of the Panama Canal expansion in 2014.

ConclusionThe Republic of Panama is rapidly positioning itself as the

transportation and logistics hub of the Americas. The country,

located at the narrowest point of the Americas, provides

unparalleled connectivity to world markets. The Panama Canal

connects 144 routes and the countrys modern port system.

With terminals operated by SSA Marine, Hutchison Whampoa,

Evergreen and PSA, it ranks among the most productive port

systems in the Americas, handling 6.5 million TEU in 2011 and

with projections for 8.4 million TEU by 2015.

Only 80 kilometers separate the Atlantic and Pacific oceans

in Panama, and connectivity is available by water, land and air.

Panamas dollarized economy, the Colon Free Zone, its strongbanking system, the availability of warehousing space and third

party logisitcs, and the special tax and migratory incentives

available to multinational companies doing business abroad, all

compose a cluster of value-added activities that are making of

Panama the best place to consolidate cargo in the Americas.

The expansion project construction site.

Mrs. Marianela Dengo is the Customer Relations

Unit Manager of the Panama Canal Authority. Prior

to her current position, she led the ACPs Marketing

Division Specialized Services Segment, responsible

for market and economic research, competitive

intelligence, and customer relations. Mrs. Dengohas worked with the Canal organization since 1991

holding several managerial positions in various

divisions of the agency.

The Panama Canal Authority (ACP) is the

entity of the Government of Panama established

under Title XIV of the National Constitution with

exclusive charge of the operation, administration,

management, preservation, maintenance, and

modernization of the Canal, as well as its activitiesand related services.

Email: info-mercadeo@pancanal.com

ABOUT THE AUTHOR ABOUT THE COMPANY ENQUIRIES

CourtesyofthePanamaCanalAuthority

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